On the Fundamental Reasons for Bank Fragility

26 Pages Posted: 16 Dec 2012

See all articles by Huberto M. Ennis

Huberto M. Ennis

Federal Reserve Banks - Federal Reserve Bank of Richmond

Todd Keister

Rutgers, The State University of New Jersey - Department of Economics

Date Written: 2010

Abstract

A substantial body of literature has now developed as a result of efforts to identify the fundamental reasons for the fragility of financial intermediaries in the Diamond-Dybvig theory of banking. Many of these articles focus on the interaction between sequential service and uncertainty about the aggregate need for liquidity in the economy. The articles in this literature are inevitably technical and focus somewhat narrowly on the implications of specific assumptions. Here, we provide a more accessible discussion of the main ideas and findings in this literature. Our discussion can be used as an introduction to the more technical articles or as an organizing framework for understanding the relative contribution of the main articles in this literature.

Suggested Citation

Ennis, Huberto M. and Keister, Todd, On the Fundamental Reasons for Bank Fragility (2010). FRB Richmond Economic Quarterly, vol. 96, no. 1, First Quarter 2010, pp. 33-58. Available at SSRN: https://ssrn.com/abstract=2189119

Huberto M. Ennis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Todd Keister

Rutgers, The State University of New Jersey - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

HOME PAGE: http://econweb.rutgers.edu/tkeister

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